AIA First-Half New Business Value Rises 23%, Led by China

Jul 25, 2014 4:14 am ET

(Updates with closing share price in fifth paragraph.)

July 25 (Bloomberg) -- AIA Group Ltd., the second-largest Asia-based insurer, posted a 23 percent increase in new business value in the first half, beating analyst estimates and exceeding the full-year figure for 2010 when it went public.

The gauge of projected profitability of new business jumped 23 percent to $792 million in the six months to May 31, the Hong Kong-based company said in a statement to the city’s stock exchange today. That surpassed the 21 percent median estimate of eight analysts surveyed by Bloomberg News and the $667 million it booked for all of 2010.

Chief Executive Officer Mark Tucker has focused on new business value as the most important measure of management progress in revitalizing the insurer. AIA was hurt by the woes at its former parent, American International Group Inc., during the 2008 global financial crisis and a failed takeover by Prudential Plc in 2010.

“The main focus is future growth, which not only appears to be going rather well, but also quicker than anticipated,” said Andrew Clarke, head of trading at Mirabaud (Asia) Ltd. in Hong Kong.

AIA shares closed 0.7 percent higher at HK$41.40 in Hong Kong trading, after rising as much as 2.9 percent to a record earlier. The stock had advanced 3.9 percent this week through yesterday in anticipation of the results announcement.

Operating Profit

AIA’s operating profit after tax, which excludes paper gains or losses from equity investments, climbed 15 percent to $1.46 billion. Six analysts polled by Bloomberg News gave a median estimate of $1.4 billion.

Net income decreased to $1.5 billion in the six months to May 31, or 12.9 cents a share, from $1.9 billion, or 16.1 cents a share, a year earlier, it said. The figure beat the median estimate of five analysts surveyed by Bloomberg News of $1.4 billion, or a 28 percent decline.

Profit of the former unit of AIG exceeded analysts’ estimates in seven out of the eight half-year periods as a publicly listed company. Tucker has tried to increase the number of agents, boost their productivity, shift toward more profitable products and has expanded into new markets.

‘Star Performers’

Hong Kong and China were the “star performers” in the period of continued business growth, Tucker said in an interview with Bloomberg Television today.

AIA’s new business value in China expanded 58 percent, the fastest among all its markets, to $120 million in the six months. Its fourth-largest single market contributed 14 percent of new business value, rising from 10 percent for the full year 2013, according to the statement.

The insurer increased the number of active new agents in China by 46 percent in the six months, compared with a year earlier, it said in the statement. The China business was also boosted by new product launches, including one targeting young families, Tucker said.

AIA’s new business value grew 55 percent in Hong Kong, 30 percent in Malaysia and 15 percent in Singapore, it said in the statement.

There are still plenty of opportunities in both China and Hong Kong markets, Tucker said in the Bloomberg TV interview.

Those markets helped it offset a 22 percent decline in new business value in South Korea. South Korean regulators halted the selling and promotion of financial services over the phone, short-message services and e-mail for much of the first half after three credit card companies were hit by the biggest personal data leak in its history, UBS analysts Bob Leung and Bob-Ji Huang wrote in a July 7 report.

Wider Margins

AIA’s companywide annualized new premium, combining first- year premiums and 10 percent of single-premiums, grew 11 percent to $1.69 billion, according to the statement. New business margin, the value of new business as a percentage of annualized new premium, widened 4.6 percentage points to 46.2 percent.

It has begun selling policies through Citibank branches in seven markets, including Hong Kong, Singapore, China, South Korea, Malaysia and Thailand, Tucker said during a call with reporters today. It will be expanded to four more markets by year-end, he added.

AIA had $47 million of mark-to-market gains from stock investments in the six months, down from $659 million a year earlier. Stock markets in its core markets were down 1.2 percent in the first half, Credit Suisse Group AG analysts Arjan van Veen and Frances Feng wrote in the June 30 report.

AIA declared a 16 Hong Kong cents per share interim dividend, a 15 percent increase from a year earlier.

“Generally everyone accepts the numbers are very good,” said van Veen in an e-mail response today. “Momentum going forward also looks good,” he said, pointing to the start of sales through Citibank branches, the removal of an industrywide telemarketing ban in South Korea and a recovery in “other markets” in the second quarter.